Tic Tac Toe, Three Recaps In A Row!
Equities start the day higher as we grapple with earnings, a SOTU speech, Crypto melting down, and a two day selloff. Tic Tac Toe, three recaps in a row, let’s go! Last night Trump did his thing and the market seems ok with it. Josh gave his thoughts here and they perfectly sum up what I wanted to say but I did I want to point out how much I laughed when our President clapped at his own comments. Amused me to no end….next time I speak in front of clients I’m going to try and pull that off. So on Twitter I’ve made fun of Boeing lately because the darn thing trades like a FAANG stock. I mean they make a cyclical product where demand plummets in a recession. Anyway they reported earnings last night and beat EPS by…you ready for this….$1.90 per share (estimates were for 2.90, they came in 4.80 *core EPS*). Now I don’t know if that’s a record for an Industrial company of their size but it HAS to be some kind of Hall of Fame print. Earnings my friends….earnings are driving this market (along with global growth). It’s not the Fed’s Balance Sheet or some mythical Plunge Protection team it’s just good old fashioned earnings growth. Now we do need to be on the lookout for “peak good news” because when things feel this good it’s possible they can’t get any better. Today was also Janet Yellen’s last Fed meeting so let’s see what she had to say (History will treat her very well, she was an amazing Fed Chair).
After the open we saw weakness in stocks all the way through lunch. Given it was a Fed decision day I wasn’t entirely surprised to see us hovering around unchanged. Markets don’t like to take a stand in front of one of the most powerful people in the world talking bout dem rates. Decent macro data today with ADP jobs beating and Chicago PMI coming in 65.7. REITs had a pretty sizable dead cat bounce but again, they go down pretty much every day. In fact most of the sectors that have been fire bombed this week did better in the morning (Industrials/ Tech). Alright so we know BA did well what else? XRX must’ve made a bunch of copies as it hit a new 52wk high, AMD reported their way to a 6% gain (so many graphics cards being used for crypto) and EA ripped 7% even though their new Star Wars game sucks (honestly, you have to try pretty freaking hard to screw up shooting things in the Star Wars universe but they sure managed to). Losers were JNPR, LLY, BBY, FOXA, and anyone who had the word “American” in a SOTU drinking game. By lunch we were waiting for Janet’s last appearance with the market up 30 bps to 2,830.
We got the Fed statement at 2pm ET and they said the same thing they’ve been saying forever: “we are holding rates steady but see inflation rising this year. Oh and we’re likely to continue to raise rates at a slow and steady pace”. That slightly hawkish tone didn’t sit well with stocks and we sunk into red territory in short order. Are we pricing in 4 hikes this year? Maybe. You know what else? Rising interest rates and excessive bullishness isn’t a great way to get rich in stocks…ugh. I might be over my skis with my current “no big deal” market view…we’ll see. We got a last second rip off the lows to close at 2,824 (slightly positive on the day) and my guy Ryan Detrick has this amazing stat for us to finish the recap: “When the S&P 500 is up >5% in January the full year has never been lower (12 for 12)”. Let’s hope this “January Effect” holds up in the face of rising yields and a hawkish Fed…
Final Score: Dow +28bps, S&P500 +5bps, Nasdaq +12bps, Rus2k -49bps
- Succinct Summation of the Day’s Events: Bit of nervousness around the Fed but we did close green and January ended up +5.6%.
- After hrs movers: TSCO -4% FB -4% MSFT -1%
- When you hit $2mil in annual revs as an advisor group the tone likely changes: “The second “critical point” for growing advisory firms generally occurs when they reach $2 million or so in annual revenues. Typically, this is the point at which an advisory “practice” becomes an advisory “business.” Or, simply put, the business can no longer be run by the seat-of-the-pants of a person dividing his or her time between acting as a financial advisor and a business owner”.
- Simple thoughts sometimes work: “As a gut check, I use the strategy I recommend to others: Occasionally, I will take my portfolio and assume the stock portion loses 35%, which is the typical decline during a bear market. I’ll then look at the resulting hit to my overall portfolio’s value and ask myself, “Would you be okay with that?” As the market has climbed over the past year, I’ve found myself answering “no”—and that’s prompted me to ease up somewhat on stocks”.
- Thornton Mellon was an all time great: “Imagine having no talent. Imagine being no good at all at something and doing it anyway. Then, after nine years, failing at it and giving it up in disgust and moving to Englewood, N.J., and selling aluminum siding. And then, years later, trying the thing again, though it wrecks your marriage, and failing again. And eventually making a meticulous study of the thing and figuring out that, by eliminating every extraneous element, you could isolate what makes it work and just do that. And then, after becoming better at it than anyone who had ever done it, realizing that maybe you didn’t need the talent. That maybe its absence was a gift.”
- Just getting my run in above Shanghai
- Could you even take one step?
- Smart take on the economy here. I worry on this now: I think the state of the nation is as good as it is going to get during this business cycle — at least from an economic perspective
- I love Chris’ charts so much. Take a look at his 1934-2017 chart and think to yourself…what if we ARE on the precipice of another multi year run?
Ok, tonight I have an amazing piece of marketing. This ad will undoubtedly win “Best Superbowl commercial”. It’s so good!
Have a good night